Correlation Between Icon Information and Snow Capital

Can any of the company-specific risk be diversified away by investing in both Icon Information and Snow Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Icon Information and Snow Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Icon Information Technology and Snow Capital Small, you can compare the effects of market volatilities on Icon Information and Snow Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Icon Information with a short position of Snow Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Information and Snow Capital.

Diversification Opportunities for Icon Information and Snow Capital

0.69

Correlation Coefficient

Icon Information  Snow Capital

Poor diversification

The 3 months correlation between Icon and Snow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Icon Information Technology and Snow Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snow Capital Small and Icon Information is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Icon Information Technology are associated (or correlated) with Snow Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snow Capital Small has no effect on the direction of Icon Information i.e., Icon Information and Snow Capital go up and down completely randomly.

Pair Corralation between Icon Information and Snow Capital

Assuming the 90 days horizon Icon Information Technology is expected to generate 0.9 times more return on investment than Snow Capital. However, Icon Information Technology is 1.11 times less risky than Snow Capital. It trades about 0.24 of its potential returns per unit of risk. Snow Capital Small is currently generating about 0.17 per unit of risk. If you would invest  1,622  in Icon Information Technology on October 26, 2024 and sell it today you would earn a total of  66.00  from holding Icon Information Technology or generate 4.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Icon Information Technology  vs.  Snow Capital Small

Icon Information Tec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Information Technology are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Icon Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Snow Capital Small

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Snow Capital Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Snow Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Icon Information and Snow Capital

The main advantage of trading using opposite Icon Information and Snow Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icon Information position performs unexpectedly, Snow Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Snow Capital will offset losses from the drop in Snow Capital's long position.

The idea behind Icon Information Technology and Snow Capital Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.